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Dow Jones (DJIA) technical outlook: Double bottom pattern as China retaliates
- The Dow Jones is showing a potential double bottom pattern amid China’s retaliatory tariffs.
- Volatility is high, with the S&P 500 experiencing a significant daily reversal, and the CBOE Volatility index near its highest since August of the previous year.
- Upcoming FOMC minutes and US CPI data releases are expected, but tariffs may currently have a stronger influence on the market.
Most Read: EUR/USD Outlook: Euro benefits from US-China escalation, markets price in April ECB rate cut
Wall Street Indexes continue to fluctuate as a fluid trade war situation continues to evolve. Boosted by Tech stocks, all three Wall Street Indexes are trading in the green at the time of writing.
Most megacap and growth stocks rose, with Apple AAPL.O and Nvidia NVDA.O up 4% and 2.9% at the time of writing with Microsoft MSFT.O up 1.2%.
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Source: TradingView
The question on my mind so far today is whether the recovery has been led by the ‘buy the dip’ mentality? This also crossed my mind as US President Trump commented that this is a great time to buy.
There does not appear to be one particular reason for the rise otherwise, particularly in light of the escalating trade tension between the US and China.
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On Wednesday, China hit back with higher tariffs of 84% on all U.S. goods starting April 10, up from the 34% previously announced.
The upcoming U.S. earnings season is expected to shed more light on corporate America’s health as concerns grow about slower economic growth. It will be intriguing to hear from companies on their outlook moving forward with some companies already pulling their earlier guidance and forecasts for 2025.
Even with early gains today, all three indexes remain down over 10% compared to levels before the U.S. tariffs were announced last week.
Volatility heats up as S&P 500 records largest daily reversal in at least 50 years
Yesterday left market participants scratching their heads as the S&P 500 and its Wall Street counterparts failed to hold onto early session gains to finish the day in the red. Not a surprise given the CBOE Volatility index .VIX – seen as Wall Street’s ‘fear gauge’, hovered near its highest since August last year at 51.66 points.
Will today prove to be another day that flatters to deceive or does this early recovery have legs?
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Source: LSEG
What can we expect moving forward?
Later in the day we have the FOMC minutes and US CPI tomorrow. At present I would say tariffs are likely to outshine the data releases but one never knows for sure.
Further retaliation may weigh on stocks and after yesterday, we need to monitor how Wall Street indexes close out today. A positive close today may embolden bulls that a relief rally may be at its infancy with more room for the indexes to recover.
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Technical Analysis – Dow Jones
From a technical standpoint, the Dow Jones on a daily timeframe is consolidating at a key area of support.
The index is hovering around these levels for a third consecutive day with a breakout seemingly imminent.
The technicals do offer a sliver of hope as the four-hour chart below shows what appears to be a double bottom chart pattern. This hints at further upside potential for the pair moving forward.
However, given the impact of external factor, there is a chance that the double bottom pattern may not play out as intended.
Immediate resistance rests at 38000 before the 39000 handle and the psychological 40000 come into focus.
On the downside support has been found at 36600 with the next areas of support at 35700 and 35000.
Dow Jones (US30) Four-Hour (H4) Chart, April 9, 2025
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Source: TradingView (click to enlarge)
Support
- 38000
- 39000
- 40000
Resistance
- 36600
- 35700
- 35000
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